Abstract Do firms value court enforceability of their workers' noncompete agreements (NCAs)? We leverage a 2020 Washington law that made NCAs unenforceable for workers earning less than $100k per year. If firms value the ability to enforce NCAs in court, then they should give just-below threshold workers raises to reach the threshold, resulting in excess mass just above the threshold. Using administrative data, we find no evidence of bunching, even where efficiency arguments are most plausible. A survey of Washington employment attorneys suggests little bunching because firms rarely need to enforce NCAs and because firms can use other, less restrictive alternatives.

We analyze how the legal enforceability of noncompete agreements (NCAs) affects labor markets. Using newly constructed panel data, we find that higher NCA enforceability diminishes workers? earnings and job mobility, with larger effects among workers most likely to sign NCAs. These effects are far-reaching: increasing enforceability imposes externalities on workers across state borders, suggesting broad effects on labor market dynamism. We show that enforceability affects wages by reducing outside options and preventing workers from leveraging tight labor markets to increase earnings. We motivate these findings with a model of search and bargaining. Finally, higher NCA enforceability exacerbates gender and racial earnings gaps.